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UBL announced its 9MCY19 financial results yesterday, making good strides, accompanied with an interim dividend of Rs3/share. This was in addition to Rs5/share already paid by June 2019, taking the payout to 68 percent.

The detailed balance sheet containing unconsolidated numbers was not released at the time of writing this, but a look at the consolidated numbers tells the focus has been more on careful and considered balance sheet growth, rather than massive expansion. And for all the right reasons, too, given the challenging conditions the banking industry has had to operate in, of late.  The pre-tax profits jumped by a massive 59 percent year-on-year. Even after adjusting the one-off event of pension charges previous year, the pre-tax profits were up by nearly 9 percent year-on-year, thanks mainly to a remarkable check on administrative expenses, and a considerable drop in provisioning charges. The net mark-up income has grown modestly in single digits, and a visible shift in asset strategy was evident. The deposit-base had kept up with the industry growth trend, by June end 2019. Besides, the cost of deposit was well under control, reflective of improvement in CASA ratio, which was at a healthy 87 percent as at June end 2019. The high interest rates naturally meant a fatter top line, on both counts of investments and advances.The non-funded income dipped, as the gains on securities went down significantly. The massive dip mostly came on account of fixed-income securities, which were realized in high value last year. The stock market performance during the period was also considerably inferior to the corresponding period last year. Other significant contributions to non-funded income were there, with decent growth witnessed in fee, commission, and foreign exchange income.

United Bank Limited 
Rs (mn) 9MCY19 9MCY18 chg
Markup Earned 111,987 83,885 34%
Markup Expensed 66,639 42,001 59%
Net Markup Income 45,348 41,883 8%
Non Mark-up / Interest Income 17,416 19,419 -10%
Total income 62,763 61,303 2%
Non Mark-up / Interest Expenses 29,775 28,616 4%
Provisioning/(Reversal) 6,683 7,446 -10%
Extraordinary item 0 8,747
Profit Before Taxation 26,306 16,494 59%
Taxation 11,903 6,762 76%
Profit After Taxation 14,403 9,731 48%
EPS (Rs) 11.77 7.95
Source: PSX notice

UBL did exceptionally well in terms of keeping a lid on administrative costs, reflective of the bank’s focus on maximizing synergies and adopting a lean model. The provisioning charges dropped considerably, aiding the bottom-line growth. The bank’s loan-book is clean and adequately provided for, and the adequacy ratios are all sound. With the interest rates believed to have peaked, the last quarter and next year may witness a change in asset-mix strategy.